Dynavox Group Ab

Tybring. I'm the CFO for Tobii Dynavox and been in this position since 2018.

Right and in today's call we will cover the events during the fourth quarter of 2021. We will also summarize the full year of 2021 and we will end the session with a Q&A session where we'll take questions from you basically. All right let's dig in. Tobii Dynavox It's a very mission-driven company, which we're going to see here on this slide. If you click, please. Thank you. That was one too many. In summary, the fourth quarter of Tobii Dynavox, a very, very eventful quarter. Yes, we did experience the effects of a continued and unfortunately accelerating pandemic, which had significant dampening effects on our ability to conduct business. The split of Tobii Group into two parts was also completed on December 9th. We successfully listed Tobii Dynavox in a so-called Lex ASEA process on NASDAQ Stockholm, where after the shares of Tobii and Tobii Dynavox started trading independently from each other. In mid-November, we communicated our first collaboration with Apple with the launch of the communication aid TD Pilots, which you by the way can see right behind me. This collaboration has actually been years in the making and enables a user to control an iPad basically using only her eyes. In October, we announced the agreement to acquire the Belgian headquartered voice synthesis company Acapella Group. We anticipate to close this in the beginning of this year. We have voluntarily submitted this deal for clearance by competition regulators. The accomplishments listed here were completed in an environment heavily and unfortunately in an accelerating way during the quarter affected by the pandemic. The pandemic also affected our ability to conduct business. It had outbreaks among our staff. We had outbreaks among our customers, pushed plan meetings and interventions into the future. It's also important to note that the interaction between Tobii Dynavox, us and the prescribers, is not seldomly conducted in the user's own home. And that kind of paints a picture on how the pandemic affects and the restrictions associated with the pandemic affects our way to operate. The disruptions and the increased cost in supply chain and logistics worldwide remained in the quarter. But it's super important for us to stress the fact that the negative effects that we're all experiencing tied to the pandemic are assumed to revert into a normalized state once this is behind us. Now I will spend a few minutes just to share some of the fundamentals about Tobii Dynavox and the markets we are serving. I can highly recommend you all to, if you haven't, to listen to the recording from our Capital Markets Day that we conducted in November, which can be found on the TobiiDynabox.com website under investor relations and financial presentations. But I will still just highlight some of the fundamentals about Tobii Dynavox as a business. So as mentioned just before, the most important thing basically for us working in the company and our guiding star is to look at our mission statement which reads we empower people with disabilities to do what they once did or never thought possible so this includes helping anyone from a children born or diagnosed at a very early age with conditions such as autism or cerebral palsy but also to users who are diagnosed later in life where things they once were able to do using a computer or communicate has been simply taken away from them. That includes people with, for example, ALS or brain injuries. Tobii Dynavox is the clear world leader in communication aids and associated assistive technologies. Our market is extremely underserved or under penetrated. It's estimated that some 50 million people around the world have a condition rendering them unable to communicate on their own, unless they have a solution such as ours. Still, it's also estimated that only some 2% of the people that are being diagnosed every year, roughly 2 million people are actually being helped. So the rest are more or less silent or locked into their own bodies. Tobii Dynavox, as a company, we are a truly global player. We operate directly with our own field force in first and foremost, the US, which also represents some 74% of our total business. But we also operate directly in the UK, in Norway, and in Sweden. In addition to that, we have a growing presence in China, which serves us both internally with supply and operations parts, but also an increasingly way for local sales into the Chinese market. In addition to this, we have some 60 additional markets that are being served by networks of reseller partners. And in select markets, we also have our own staff on the ground working as account managers, local trainers, and the like. Tobii Dynavox serves the entire user journey and all the stakeholders in the ecosystems needed for this. The hardware, which we're probably most known for, is an important yet only one part of our entire offering. If you look very kind of generically at our offering, it starts with, on the left, the content. In this case, we have developed and we continue to develop the world's largest library of communication symbols called PCS, which we, of course, use ourselves in our product, but we also license to other industry players, but also to other types of companies, such as Microsoft, who have them integrated in their office suite of products. In addition to that, our newly acquired synthetic voices solutions plays a similar role in terms of content. If we then go to the right, we add this into software that we build, typically tailored towards the applicable user groups. and then in addition to that we innovate design and produce the tailor-made devices which the software and the content is is run on sometimes with features such as eye tracking they're typically always compliant with medical standards fda mdr etc and are ultra rugged in terms of design and functionality we then take part in the assessing and the evaluations of assisting the prescribers to have their users eventually obtaining a device. We also take a majority of the labor and the paperwork needed to do the processing for funding, et cetera, from either public or a private insurance system. And then last but not least, we operate an extensive support machine and training infrastructure to help existing as well as prospect users to be maximum success for all the stakeholders. So that's an overview of the offering of Tobii Dynabox. Okay, so back to the fourth quarter. And if we dig down a little bit more in detail about the fourth quarter of 2021, as mentioned in the start, the fourth quarter of 2021 was extremely eventful three months. Our underlying business continued in a rather unchanged manner from before. That means that we continue to deliver thousands of voices to our users, but the continued pandemic had, as mentioned, a significant impact on our ability to meet with our users, but also our ability to deliver our products. This combined with a temporary yet unusually high cost for freight, which Linda will talk to a little bit later, and components shortage held back our organic growth to a mere 3% year on year. This combined with a weaker than usual profitability adding to a fairly overall complex environment for us to operate in. COVID for us meant outbreaks among our staff, It meant outbreaks among our partners, our customers, and part of our supply chain. We are all, of course, convinced that all these effects are temporary of nature, but with the pandemic eventually behind us, for us, it's back to normal on all fronts. That means including a clear, clear pent-up demand for our solutions on people that simply has not been able to be served. It is therefore quite reassuring that we, in spite of this headwind, managed to conclude three monumental milestones in the fourth quarter. So to name them in some sort of order, we launched the world's first eye-controlled, medically certified communication aid developed in collaboration with Apple. The product has received extremely good feedback from the market, and we expect a significant uptake in sales once the product has been added to tenders and once orders are being processed through the somewhat slow and bureaucratic funding systems in some countries. A second main milestone was that we agreed to acquire 100% of the Belgian headquartered Acapella Groups. Acapella has been our longstanding partner and leading provider of the synthetic voices to specifically assistive technology space. The acquisition of Acapela is not yet closed, so we don't see that in our books yet. We await a regulatory approval process, which is assumed to be done sometime during the early parts of this year. Acapela for us brings a very strong product portfolio. They have a very strong market position. They bring some 6 million euros of annual revenue at a healthy margin to the company. but maybe more importantly a very very competent and dedicated team of some 50 employees so as soon as the formalities are behind us we look forward to start the real work together and then last but not least and one of the reasons why we're sitting here right now is that on december 9th mark marked perhaps the single biggest milestone in the history of toby dynavox When we, after a very intense journey in separating the Tobii group into two parts and then listing Tobii Dynavox as a standalone company traded on NASDAQ Stockholm. If we then go up in the helicopter a little bit and look at the full year and conclude the full year of 2021, we can similarly to the fourth quarter, just conclude that the pandemic had a continuing hampering effect on our abilities to conduct business. 2021 was the second year in a row where we were unable to grow revenue substantially. However, and this is super important for us to stress. Throughout the pandemic, we have managed to maintain and secure our top line sales. It has never declined. This is rather unique compared to many other companies with a similar profile to Tobii Dynavox and instead who have instead experienced through the pandemic significant drops in sales. And additionally, if we dig a little bit deeper, we can also conclude that our strong market position and specifically our infrastructure in the US, which, as everybody knows, a country which was heavily affected and is heavily affected by the pandemic, has in fact showed a robust sales throughout the year. The reason behind this is a market which is hugely underserved and a big potential combined with the fact that we have a very strong offering, both in terms of product, but also in terms of infrastructure, for example, with contracts to reimbursement bodies. So with the not insignificant amount of work and bandwidth and money consumed by the listing process, I'm also confident that we now have an organization that will be even more focused on getting back to a solid top line growth. Like everyone else, we don't know exactly how the pandemic will affect us going forward, but it's hard at this point not to be rather optimistic about the fact that we see a clear light in the tunnel right now. I would like to hand over to you, Linda, to take us through the financials. Yes.

Thanks, Fredrik. Let's get into the numbers a bit. As Fredrik said, in the quarter, revenue grew with organically 3%. We have had some effect of revenue that was pushed from Q3 to Q4, but we also negatively impacted by revenue that was pushed into 2022. If we adjust for this, revenue grew 1% organically. Important to understand is that Q4 is normally a strong quarter for us since a lot of the insurance coverage ends end of the year. We continue, as Fredrik already mentioned, to have negative impacts by the pandemic. We have experienced outbreaks among our staff and customers. We continue to also have challenges with logistic and supply. We simply cannot get in enough products to meet the demand. Gross margin was hit by a one-timer of 4 million sec, but was also affected of increase of cost of components and freight. We remain confident, though, that the gross margin will return to levels since neither pricing or go-to-market model has changed. They are largely assumed to be temporary in nature. So looking at the cost Based last year, it was artificially lower by some 4 million related to received government grant, but also lower activity than normal. EBIT was affected both positively and negatively by the push revenue from Q3 to Q4 and from Q4 into 2022. Gross margin affected negatively, both with one tyrants of 4 million SEK, but also, as I mentioned, the freight and components cost that started to see the increase that we started to see during later part of q3 r d cost increased in the quarter with about seven million sec this includes that we also had increased capitalization and increased amortization related to larger product investment that was launched during this quarter such works on the td pilot one timers related to the separation was about five million sec Note also that we had the positive effect on currency on EBIT of 6 million SEK. So for the full year, revenue was flat versus last year. But if we adjust for the 10 million that was pushed to 2022, we had a 2% organic growth. We can also conclude that our strong market position and infrastructure in the US, a country heavily affected by the pandemic, has in fact shown a quite robust underlying performance. We have been challenged with both components shortage, logistic problems, pandemic, and this has affected both our revenue and gross margin in the full year. Gross margin has been negatively impacted by the extreme freight costs that we have seen over the year, almost double the price versus prior year. And we also see the increased cost on components. We estimate this to be around 10 million SEK for the full year. Again, this is a clear consequence of the ongoing pandemic and hence assumed to normalize over time. So if we start to conclude the full year EBIT perspective, I will try to simplify it a little bit and I will start from the top. So looking at the revenue, that was highly impacted the pandemic. We have not been able to meet our user component shortage and therefore not been able to ship product, but also delays in logistics. Of course, no one can know what revenue should have been without the pandemic, but we were really geared up for a much higher growth already going into 2020. Related to the delays in the logistics that we talked about earlier and the push revenue into 2022 of around 10 million, that affects EBIT of about 8 million SEK. Until this year, we have never seen this type of backlog. So for me, backlog is order not shift. So this is unusually high. And we normally have a pretty fast process from when we get an order closed until we have shipped the product. So getting into the second effect on EBIT is the gross margin. As I mentioned already, freight has almost doubled in price during 2021, but also later part of the year, we have seen increased price on components. And if we summarize that, we estimate that it has had a negative effect on the profitability of 10 billion SEK. So the third effect on EBITs versus prior year is OPEX. The cost base last year was positively impacted by both that we had government grant, we had work reduction, we didn't travel at all, no events, et cetera, to a total of 22 million SEK. The separation from Tobii, we have had one-timers during the full year of about 8 million SEK. We also had had a slightly increase in R&D spend, but we have had lower capitalization increased depreciation and amortization, and the total net effect is around 9 million SEK. The increase in amortization relates to larger product investment that was launched both at the end of 2020, but also during this year. It's also worth mentioning that Tobii Dynamo has a large portion of its business in US dollars. We estimate that we roughly sell in US dollars for about 70% of our revenue and 80% of our cost in US dollars. which means that the net effect on EBIT is not that significant, but of course it can have some timing effects. But therefore note that we also in the full year had a negative effect on revenue related to currency, but we had a positive effect on currency on EBIT level of 7 million SEK. So let's talk briefly about our balance sheet. At the end of the year, we had 197 million SEK in cash at hand, During the last quarter, in conjunction with the separation from Tobii, we have cleared all the transaction and our balances, which means we have repaid the loan to Tobii. We have purchased a perpetual license related to mainly the trademark to be able to use Tobii in conjunction with Dynox. We also received a shareholders contribution from Tobii. But if we adjust for the transaction related to the separation from Tobii, our underlying cash flow from continuous investments, it continued to be positive. If we look at our net debt, including lease, it was 409 million SEK at the end of the year, and the leverage of net debt in relation to the last 12 months EBITDA was 2.6 times.

Thank you, Linda. So, summarizing the quarter and thinking a little bit into the future. Well, COVID did continue to affect our ability to conduct business, to meet with our users while also hampering our effects to simply get enough supply of products. The costs for components and logistics were also unusually high, again, related to impacts solely associated with the pandemic. We experienced outbreaks among staff, partners, prescribers, and customers. But however, and notably, we managed to maintain a strong underlying sales growth, specifically in the US market, which is our largest market, while that country is still being heavily affected by the pandemic. And in spite of this, we managed to just, in one single quarter, Launch our first Apple-based communication aid, the TD Pilot, with eye tracking after several years of development in deep collaboration between Tobii Dynavox and Apple. We agreed to acquire one of the finest companies in our space, Acapella Group, adding essential skills. We added competencies, products, revenue, and hopefully we can close that very soon. We crowned the quarter and the full year with a successful separation and subsequent listing of Tobii Dynavox on Nasdaq Stockholm. So eventful quarter, not without challenges, but we stand on a very, very solid ground. We expressed our financial targets at the end of 2021 and which can be summarized is that we want to grow organically adjusted for currency by more than 10% per year. We want to do that at a 15% or higher EBIT margin. Again, back to numbers where we have been historically. The market potential, our position, our offering makes us confident that we will deliver on this once the pandemic and the associated effects of the pandemics is fully behind us. And with regards to dividend, the board of directors of Tobii Dynavox remain of the opinion that Tobii Dynavox will eventually be a company that will share excess earnings with the shareholders through dividends. However, for the upcoming annual general shareholder meeting in 2022, no dividend is proposed. With that, we conclude this presentation, part of the earnings call, and we will leave the microphone to our colleague Christian Hall, who is joining us here in this studio, who has gathered questions from the audience. So hit us, Christian.

Okay, thank you. So we got a couple of questions from Daniel at Handelsbanken, and I will start with the organic growth. The organic growth obviously was far from targets. What kind of visibility do you have with regards to your Salesforce pipeline? And would you say that the COVID-19 has created a pent-up demand that could trigger a 10% growth level already from Q2 this year?

First of all, if I answer Daniel's last question first on the pent-up demand. We don't exactly know when this pandemic will be over, but you're absolutely right that there is a pent up demand for the sheer fact that there hasn't been fewer people diagnosed with the conditions that we serve. They're still out there, but we simply and the prescribers have not been able to meet them. So we do foresee that there will be a artificial tailwind for us going forward, but it won't be instant and it won't be fast. But we will definitely it will help us to meet our revenue targets going forward. With that said, looking at the effects of this, Linda, do you want to answer basically what you see, the underlying growth?

I mean, we have seen, as we already mentioned, that we see a strong underlying performance in the US at the moment, and I think that's a pretty good, strong sign for us going forward.

And in terms of visibility into the future, Every market is a little bit different, but again, us represents 75% ish of our total revenue. It is a fairly process oriented process to basically obtain a device. It starts with an assessment, which eventually turns into a prescription, which eventually turns into some sort of funding process, et cetera. So we have some visibility and we do see that the early indicators, the number of applications that comes into our process is actually. quite strong. We do see some sort of 10% or so growth, specifically in the communication aids market in the US, if we clear out for these kind of delays of supply chain, COVID, et cetera.

OK, the next question. How has the reaction and demand for the TD pilot been so far? What kind of volumes did you ship in Q4, and what is your forecast for 22 shipments?

The way it works in our industry, we launch a new product and then of course it's the old bells and whistles and balloons about launching the product. But what then happens is that these products, demo devices or even assessment devices are being shipped out to various types of assessment centers. We also start the process to add a new product to tenders and the like. Once the product is in the hands of the prescriber, he or she can then start to try it out on the user and then as mentioned before, start the application process. So there is a delay of several months, up to half a year from the day that a product is kind of introduced to the market until we start to see some sort of volume shipments. So it's too early for us to tell right now exactly how big the real business demand for the product will be, but it's super reassuring to see for the users who have received products already, and the market feedback from both professionals and actually maybe users who were not even applicable to these devices that this really works. It really, really works. So we're quite optimistic that the TD Pilot will represent a significant portion of our total sales in the not too distant future.

And regarding Acapella, how has Acapella performed since you made the bid? Is it keeping up the momentum? And maybe you could add somewhat more flavor to the synergies that you see with Acapella. Sure.

So as mentioned in both in the press release and when in the acquisition and now on this call, Acapella is a company with roughly a 6 million euro total revenue. It's been performing quite steadily over the years and at a profit margin in line with our profit margin targets as well. And, uh, it's important to say that we announced the deal. We made the acquisition. We made the deal to acquire the company back in, in October, but we actually don't own the company yet. So we don't have full visibility. We don't control the company yet, but we're quite reassured given where the market is going, that this company continues to, to perform as solidly as it has done for years. When it comes to synergies, um, the, the, the company. serves not only Tobii Dynavox, but also other industry players, but also other market verticals that need synthetic voices. We of course know the assistive market space the best, and we see that the synergies from the acquisitions for us are primarily on innovation. If we can have our engineering teams and our product teams collaborate around communication aid, hardware and voice output, we will be able to add not only better integration in software, but also you will be able to add modalities that includes expressing your feelings in a much better way. Of course, adding and aligning our product rollout so that we just launched one of our software in Hebrew, that there are a good selection of Hebrew voices for men, women, children and adults, etc. So I would say that the main synergy for us is to maintain the company, continue to do exactly what they've done before, but reap the synergies when it comes to first and foremost product innovation.

Okay, and the last question from Daniel is regarding your organic growth in the US market and how you view the near-term perspective for Q1 and Q2.

Uh, we don't comment specifically on, on, you know, the next quarter or so, but, um, the US market is, is an interesting market for us because we have a much better control of the different elements and the parts of the, of the prescription cycle. And, uh, I was myself in the US just three weeks ago, and it is obviously evident that the market has been quite hard hit by the pandemic, uh, on a more societal level. And therefore it's quite interesting for us to see that we had a solid underlying organic growth in the U S alone also in 2021. Uh, but similarly here that the dampening effect of not being able to meet our users, not being able to ship, not having enough supply has of course held us back. So I am quite confident that even though the U S has not declined as much as maybe some other markets, there's still a pent up demand. And I'm quite optimistic to revenue growth once the first and the second level kind of effects of the pandemics is behind us.

Okay. And another question from the audience regarding your gross margin and how you view the levels that you saw now in the fourth quarter adjusted for the one offs and so on. Do you think it's a representative level and how should we think about the gross margin going forward?

Yeah, I think, I mean, short term, we will still be challenged with both increased cost in freight and the increase in components cost. But we see this as being very temporary. So long term, we will go back to the normal level that we have seen historically.

Yeah, it's important. Nothing has fundamentally changed. You know, we're still selling at the same average selling price, using the same types of channels, et cetera, as before. And that's not something that we foresee will change for this industry. So the only changes which temporarily pushes our gross margin down is basically the freight costs that Linda mentioned and component prices, et cetera, which we estimate are of temporary nature.

Okay. That was all from the questions.

Great.

Thank you.

OK everyone, thank you so much for dialing into this webcast. We appreciate the questions and the engagement in from you all in in Toby Dynavox. I would like to stress the fact that we're accessible people. Please don't ever hesitate to reach out should you need any clarifications. We will continue to issue earning statements and clarifications at least four times a year in this fashion, so stay with us and hopefully we will be able to straighten out some of those question marks. Thank you for today and onwards.

Thank you.